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tv   Key Capitol Hill Hearings  CSPAN  April 17, 2015 6:00am-8:01am EDT

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mism and the viability is now being questioned and in some minds and doubt. germany has played and will continue to play a pivotal role in managing the problems. wolfgang schäuble has for decades been a defender of european integration. following his opening remarks we will be joined by the director. for those of you who to eat hashtag euro. we look forward to hearing your
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remarks and thank you for being with with us. there will be a conversation here at a conversation here at the table and we will open that up as long as time allows. thank you very much. >> thank you very much for the introduction and for inviting me i am very honored. i can only address a few of the problems you just mentioned because i am only the finance minister.
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it was quite successful after all. you might think that our decision-making processes are complicated and you might think that your policies will lead to little or no growth. i can simply tell you that once the economy is growing again and every country is expected to grow but i want to raise a more fundamental question. how can advanced economies achieve growth? for the past quarter-century
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there was a credit boom in 1997 and after that it came back in 2007. at the beginning of each of these cycles people thought we were entering a new era of prosperity. it became clear long ago that the instrument no longer works the way it used to. you can see this clearly when japan tried to use this policy. in my view expanding monetary policy but i can contribute them
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to be one of the causes. in my view economic policy does not predict economic growth of the long-term. one reason for this is that policies that promote sustainable growth promote long-term expectations. consumers expect policymakers to create long-term sustainable economic activity. the global activity continued to give cause.
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the debt stands at $199 trillion. it is up 57 trillion dollars in 2007 when the financial crisis started. in china it is nearly quadrupled since 2007. it appears to be built on debt. in the united states the debt ceiling will have to be raised soon. the government shutdown that took place in october 2013 and the alarming amount issued by companies is degrading.
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i do not mention the dollar because it is not being grass by prosperity. the eurozone is higher than ever. we are only trying to achieve lower debt ratios. the most important lesson is can we adhere to the rules? i think we can.
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we have to. you have to keep in mind. the state has to adhere to the rules to keep the economic area in tact. sometimes more, sometimes less that's the direction. we were succeeding in overcoming our challenges. we will continue to stand as a
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model to the french national government. if anyone else has a better idea, please tell me. i will be happy to take a look at it. first we intend to make sure the government spending grows more slowly. government spending must not grow faster than gdp does. second we continue to implement reform. it must boost the prosperity of the economic european colonies. that is what reform is for. making the labor market more
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flexible and are reform in particular must improve education and training. third we are boosting whatever we can. we are setting up a new investment fund in europe which stands to gain 300 billion euros. it will open new sources of financing for new companies. we have to ensure companies to invest more money in infrastructure.
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we have been putting this agenda in europe for quite a few years now. sometimes more successfully, sometimes less. the formula is working. your peering companies that have already implemented real reform are starting to see results. they are growing faster than ever. we can't provide financial assistance without providing something in return. we can't help you come country that can't help itself. if you separate decision-making
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policy and if you separate opportunity from risk, you can succeed. as long as individual members remain comfortable there can be no liability in europe. even the united states the government does not assume responsibility for individual. it wouldn't solve a single problem. it would create a problem of
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expectations. we in europe must play close attention to the problem. and take responsibility for what needs to be done. what is succeeding in changing itself? sometimes change comes slowly. sometimes it comes surprisingly fast. last year we launched the banking union but even when change doesn't come quickly it doesn't mean that it has failed. in fact it's usually successful. we call for reform and assistance.
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this may well be the most important long-term investment we face today. in europe still be able to cope only if our members fix our own economies and society to society. we need to fight our internal economic grievances. if we become weaker in germany we won't be able to overcome the challenges and we can't allow this to happen. it will be decided only on the basis of economic strength.
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and of course we in europe continue to look to the united states for our security but the conflict in russia is a conflict that will be one with economic strength. european sanctions are having an effect on russia. we can't afford these sanctions as long as. visit domination of physical space that counts? this is what russia stands for.
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that is not the united states europe. in our joint efforts to ensure success europe can be an effective help for the united states only if we have a fiscal economy. that is what we are trying to do. we are following our own formula >> thank you very much for a very comprehensive and focused and relatively short speech which is sometimes rare in this room. it's very good.
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let me ask the first question on the spending issue. you said spending should not grow faster than gdp. you talked about government spending as a whole but as you know there's a lot of debate that spending that creates productive assets including digital age education, and frustration are actually creates more. at the time when germany has a 300 billion-dollar plus in the balance don't you see a much more important role to public investment which doesn't have to be physical?
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the right come kind of education in the digital age is part of that. isn't that a win-win situation for everyone? germany's growth rate goes up and the surplus goes down and to some degree it helps the whole eurozone. in my view the question is a little bit too thin. even if you pay low interest for a long-term very reluctant in this regard. even if you pay low in tryst, you increase your debt. sometimes you have to pay your debt or you try to create in
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increasing budget issue. i tried to mention shortly, normally i speak longer but i would prefer to save time for question-and-answer is we have one of the major problem of all economies to increase.
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there are gross expectations for coming here. and they have given the recommendation not to increase our expenses but to reduce our taxation. we will spend in our government anything available for increasing infrastructure. if i increase infrastructure investment germany will be better. we have federal government, we have state level that we have to keep in mind and we need to deliver more. i think we have a balanced way to increase investment.
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it has become better in 2005. she has very much relied on strengthening the part of federal budget increasing federal budget for research and education. no government, never has increased the budget for research and education. even in this year and you know germany very well education is a great responsibility. but federal spending for states to raise money for education has never been increased in so i
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numbers. having said this i think the balanced way the problem isn't only investments, even in germany i always have to be careful of this most challenging talk for me. i have the best intention. i have mentioned institutional framework. a lot of economists all over the world's are telling the most important thing i could tell you in some eurozone the weakness of institutions, the main reason of
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not sufficient growth, even in germany, if you look at how long it takes until you get the administration license to build a new airport. [laughter] the institutional framework you have to make some sense of the licenses of investments to be implemented only for infrastructure in the so-called new group of lenders. when we asked parliament not to
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be compared to the same way of the senate but even more difficult for the government, if it's possible, i don't know, that we could use this good experience in germany. he said no no, not at all. some of the members said it's very difficult to get reform in relation to the labor market. it's like my french friend i can tell you a long story how difficult it is in france with public opinion to convince that reform in the labor market is needed.
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france would be happy if someone could, but it's difficult to get. as long as you give them you will never get the distance you have to take. any democratic system in my long experience tends to take more complicated positions and you will only get them toughened long-term needed if there is no comfortable alternative. i'm thinking we must give it to them.
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>> let me follow up on that. germany has a large turn account surplus despite the investment program that you have all outlined and despite your calls for higher wages. imf predicts it will be 8.4% of gdp this year. your output far exceeds the domestic spending. what responsibility or opportunity does germany have to address that imbalance in ways
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that would benefit german consumers and workers and make germ european more balance. the surplus thing is indirectly invested. 25% in liquid assets including the central bank and bring a negative return. if you have an account surplus we would have more monetary union. until the last couple of months when we have more account surpluses and of course the beginning of the exchange. if we didn't have the surplus we wouldn't have the deficit.
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we need a balance. number two the account surplus in the last couple of years. i think they are timely and i never mac or recommend monetary decision because in germany we strongly support the system and the bank. if we work to get by even by monetary policy not only by monetary policy, but other policies and the weakening of the euro exchange without any
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doubt there will be an increase of surplus. it's unavoidable. it's not long-term sustainable. don't underestimate we are spending a lot. a huge part of our concept of direct investment again we are doing it. therefore we have in mind that now in line with
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increasing pensions we have been too complacent. we should worry about our long-term competitiveness. we have to have in mind even in germany that the medium turf of competitiveness. the last remark if you ask my
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european colleagues, what do you prefer in economic germany though say i don't know. even in the imf we will get european on behalf of germany. it's difficult to do everything right. >> speaking of doing everything right, yes it right, yes it today you said there has been very little contagion in the bond market. did you mean to suggest by that that europe is now strong enough to lose a member from the eurozone because it can do its homework? >> know i have been asked if it would be a danger for global
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economy. of course i felt myself ask do you and your german government know your responsibility? not only economically but also politically. do you have a mind to tell all the instances that we know and we have our responsibility and don't care. i'm sure we will but whatever happened in europe we will not take the risk to endanger this bill stability of global economy. we know we will have my great colleague and he's a very
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experienced economist. you can listen to him what he's saying. we have ongoing precautions and the program we agreed has been an anomaly. it goes till the end of 2014. we have extended this program twice and now we have to extend it from late february until the end of june. greece is trying to get the pending disbursement program to get 1.8 or 1.9 billion. we can only get a memo of understanding if they agree
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broadly it's not a hundred%. we never ask for a hundred%. his programs have always been the key of these programs is that we have decided that we want to help any member that has lost access to the financial market. we want to buy time in taking liability. we did it for italy and ireland spain cyprus, and turkey. we have to have in mind how long will we take time until we can't get access to financial markets.
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this is year 2022 and you may ask what is in the rules of the imf. we did it in the private sector and the access to markets is defined not over 100% of gdp. it's supposed to be achievable then. but of course you need a primary surplus if you want to exceed by 160% without any government you
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have to tell what do you think when you get access to the markets. if you don't have access to financial markets who will lend you money? the europeans have said we are ready to do it until 2020. if you find someone else who lend you money, okay we will be fine. amounts of $200 million euros
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it's not as simple as it has been. we are saying if you don't we can't allow spending. a great debt from greece and the competitiveness of greece. it will be long after 2020. it is financed for 30 years in general.
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the problem is regaining competitiveness to get primary surplus. >> what should we ask him when he comes here? >> oh no i will not -- so often i meet my european colleagues sometimes more often than that i don't need any intermediary a. >> i thought i'd offer, thank you very much. >> one more question before we might turn to the audience. i've had the honor to follow your current career for quite a while. you are a great european. you believe in europe more than many others then i've seen now
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and i've had one meeting with you where you again reaffirm that strong belief. i think what year up has achieved in the last decade is fantastic achievement when you think where they came from. at the same time it seems to have some how run out of steam. the participation rates in european elections are disappointing and falling. somehow the enthusiasm that you have and i am not a member but i also do have is very fragile. you have a situation where it's close to 25% with a program of
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wanting to get out of the eurozone and 25% of the large european countries is quite a figure. you have the fact that the greek government has 70% support of its electorate. how can this debate took place but i have a feeling that most people i don't want to speak for you but something has to happen for the union to survive on the political sphere. that has to do in a way with europe regaining some enthusiasm, some dynamic for the future. how do you see that as a great european that you are? >> do we have another two hours? it's a key question.
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it's a question of democracy. if you know what's going on in the u.k. -- not to answer your question is incomplete but i can only react on my assumption. i think in the substance of the human being, whatever you have is not as much as you want to have.
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we have a wonderful in this part of germany until 1990. the first free democratic election the participation rate was far above 90%. people are sure they have the right to elect the democratic election. oh yes of course it's on behalf of all the public. in local communities when we elect mayors, it's often the case that they are not familiar with the party. they don't know if there member of the party or not.
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in local elections for mayor the participation rate is a problem of people saying democracy is grounded. they must not pair care what's wrong? democracy is a little bit risky therefore that's my first response. response. what can we do, we have to care. we have to think about it. i'm asking again and again if we do it like an american or a westerner as a common discussion, how do -- how can we end this exchange of communication by the it
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revolution? it is not really understood what it means for our society and art democratic system. it is united with communication. how can we find a pathway to take a modern communication system and modern technologies and have it fit with our values of democracy. i'm quite sure that democracy will only work on the basis that it's nonrepresentative. if. if there's no presentation there is no democracy. we have to find the link between democracy and the rule of law and separation of power and the
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relations between the different legislation, executive power. not to mention the jurisdiction as well. democracy i'm quite sure for most people, and all over the world, if they have to choose they choose values so it's our responsibility not to forget that it's not forgotten but it's worth it. i am quite out optimistic as soon as it gets a little bit twisted it becomes better by the way.
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it has not been as successful as they expected in the last election. the result was too high but it was not as high as expected. if you look at finland there will be general elections on sunday. u.k. doesn't play in the general election. :
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you will see all over europe the european integration the basis is never disputed. if you're asking, do you want. to actually -- there is not many -- there is no his danger for the european
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union. quite optimistic. so but then we have to care for whatever we do in europe command you can understand. difficult. to make it more efficient more transparent. the european commission that they have not liked it but you may have followed the role of the european parliament has been strengthened.
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if you told tell people whatever they agree they will defending to tell people know we can. we have by far the most advantage commit economic integration. therefore it is clear. it is in our own interest to defend the european and therefore we have to grant solidarity. the solidarity is never one way. it's a doubling.
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before you have to those long as we don't have institutions have to work for confidence in agreement. >> thank you. they we have time for some questions. please tell us what you're away for the microphone. remember questions and the ?-question-mark. >> brookings. that is to see you again. i have a question about the long-term competitiveness about german economy. a lot of major german companies are saying they are leaving germany because of the high cost of energy. some of them are stepping up the capitol investment. in your view that unless there is a radical change in the energy policy is there a risk that there will be a
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hollowing out of germany's industrial base? >> i no that energy is a problem with germany. is not to be disputed. it's difficult to say. the government does care. i think we're moving in this direction. the change in a nuclear energy policy. too much renewable energy. as. as one of the reasons i said that easy to be collected. i think we will not.
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you must not believe any world. i have to take interest. [laughter] the energy. it's not a problem. not only germany but all europeans risk-averse. one of them the most disappointing news i get in my time was in the beginning of 2011 to be a ss the major company in fruit implement technology moved off it's not only reserves but all the production from europe from germany to us not on
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behalf of german that on behalf of european. it's one of the key problems we have a different view. manipulation. the best expert. they are risk-averse. how can we link the needed innovation capacity. if you look at the knew technology, we all know that it's a must. it was opened last monday morning this prime minister. and, of course teaches the economy. i think we have that will be
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successful. very engaged. successful. very engaged. but when it comes to data protection. we should start to discuss how we can find a good relation between the revolution a communication system and the value. privacy and not to be manipulated. and to controls? not only only for your also for us. sometimes to fund normally -- normally us his forehead in the development and europe is following. following. but we are ahead. you follow.
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the real protection is increasing. but increasing. but actually european legislation. as a little bit. have to ask german. a little bit bland. the feelings. in data collecting. collecting. it is not about is. i think i think this principle must be questioned because the history of freedom, freedom, normally it is allowed was not forbidden. the opposite of what happened with you. you can see. it's not easy. really i think we speed up. wait and see. a lot of people including
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the uk. new line sometimes too much. financial services. they always tried to demonstrate the real protection and modernization. we will still be. >> from brookings. let us assume for a moment that the greek government does everything you wanted to do about this big in terms of fiscal reforms kind of structural reforms. if there is a question that about 175% of 175 percent of gdp. assume that greece does everything you wanted to do what do you see a viable path that greece can't survive and prosper within the euros on without a restructuring?
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>> the answer is clearly yes. yes. i do not want anything for free. everyone speaks to what has been agreed memorandum of understanding that will be discussed as mentioned but three institutions. and the good program including this debt to gdp i don't know the actual number but it's about 100. in this in this program the presumption has been that until 2020 2020 this ratio will be below 120. in the year in the year since this program is agreed the number of the program.
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they have developed faster than expected. the deficit is developed faster than expected. earlier expected. a very promising way. and then and now we have a knew government. is that okay? tell us how you imagine someday. maybe you will ask. but once again have already said, if you want to tell you how long he served as finance minister the next six years. his biggest his biggest problem will be enough the dead.
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for a long time very modest financing. therefore it may be a problem in future decades. today. challenges computer challenges. quite happy. much more. but as long as you are telling the problem today is the day moving away that greek economy is becoming a little bit more effective. the company can deliver a part of what the greek people want to enjoy. you have to know how is that
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the inquiries bundle them is still higher ratio people is still before this government has hired again people of the last couple of years is higher that it every than every other member state of the euro zone. it is difficult to become competitive economy, not to mention the very difficult challenge is not to be criticized as government. all these problems inherent. but then the real challenges and not to blame the europeans not to understand
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how the. >> thank you very much. the other help for the brookings institution. obviously most of the questions your presentation has been about europe the euros on. you are here because the backdrop of global meetings for the imf. i'm wondering if you might make some observations about germany and europe is a global economic player. we just had this rather unfortunate apparently between the united states and many of its european partners on the knew asian investment and development like set up a check. you mentioned the uk just a few moments ago. the uk and other european countries are very quick to
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join in this institution. a lot of questions about the implications of this. i just wonder if you could give us some of your observations and thoughts on this general set of issues. thank you. >> i think of course we europeans tried to explain. if you think the chinese have to explain what they are doing in china. explain. explain what they want us to do. therefore we're speaking course of what we're doing europe. i am strongly in favor that we strengthen our atlantic partners. a very much in favor to use the g7 umbrella and implement to make it efficient. in this very strategic case
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as time goes on i would say we are in a it would be possible someday to convince u.s. congress to implement reform. very difficult. we always try not to blame. but it makes things difficult. he can't lead economically and politically only by. it soft power. soft power needs. the convention a lot.
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and i could give you a lot of examples. [inaudible] would have been much in favor. we didn't achieve it. but what we managed to do it in a closed context. a lot of very complete and open discussions how we can manage always in your. [laughter] france, italy, germany have decided to give. now we have, position for negotiation but we also
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communicate and will do it in the occasion of this meeting today and tomorrow to not only discuss under this g7 member which has decided to join but also the american friends and also canada. with australia this issue cause any additional problems in the transatlantic relations because we have had too much none of this problem has been needed. no necessity for it. too many problems. we will succeed only on the
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basis of cooperation. if we want to work decided to ?-question-mark that 80 percent of the 70 million people deserve to live in line with democracy, rule of law. economic sustainability. and you can know dictators a very nervous. much more confidence in this periodic. and if you. the motivation european people the question of who was never think that we have achieved.
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>> right here last question. >> thank you very much. i represent greece. greece. native greek. >> hold the microphone closer. >> i have two questions for you. greek media and international media reports a lot of the members of the greek government to the electoral process have been -- have demonized as representative of the german policy. according to the news. trying to impose. how do you perceive that? what is your reaction to this argument back also i
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think that also i think that the greek people need a clear answer to that the potential. do you think it is on the team is a big government and is don't reach any agreement >> look if you want to stay in politics and i do it by enthusiasm you have to know you will be good at it. if you don't think they'd witnessed in the kitchen. it is not a privilege. the media has been quite a lot. i have -- go meetings you can read all of this.
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perhaps a 22. please my fellow countrymen don't make creek. people in greek suffer much more than. i could tell you even in german media and not been pleased. i don't -- i have not learned greek language. i can't read greek newspaper [inaudible] >> and 72 years 72 years old. i we will not learn. [applause] i have a good relations.
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i have never -- if he didn't make a personal offense to. not at all. we had different political opinions. i have a lot of people in germany are good friends very different political opinions. i can and knowing complaining political parties, political leaders including myself tend to say things if they will be asked federal. i didn't say this. of course i am not -- of course sometimes real story,
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until you secret. in the last in the last couple of years in my own party for a long time soon as amendment will be too general, spending too much money. and i have often been recommended by people from the imf that i should be have in mind as soon as i have friendlier discussion with the great college. misunderstood. germany will not support. it doesn't change anything. and once again i have to be very careful. all the media.
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there is no news. his greece wants to get more money and in the given program you may know the great prime minister doesn't want the program. nobody will ask me to take program. as different situation. continue to have negative interest rates. you don't want everyone ask for money. but if great want. greece has to fulfill to deliver the letter what has been agreed. if not it is fine. up to greek to decide what
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we will happen. of of course with my greek colleague as my opinion i advised. but not publicly. no. the decision of the greek. and therefore you have to ask. >> about the exit from the euro. >> it is only a decision. >> thank you. our time is up. if i can ask your place to stay in your seats so that the minister can leave hollywood appreciate that. as you know we have a quick turnaround time. if you get one of those little risktakers have a seat. i recommend you keep it. if you don't, your supposed to leave.
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you will be personally escorted out of his day. thank you. please join me me in thanking the minister for his time. [applause] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]
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coming up, the chinese ministry of finance will discuss the impact of the country's economy on the asia-pacific region and the united states. you can watch this event live at 3 p.m. eastern. >> this weekend is full of flight begin coverage on c-span networks with politics on c-span, ballet time so-so of books on booktv and historians discuss the end of the civil war on american history td.
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>> we return to the brookings institution for remarks by degrees finance minister. he talked about the country's economic challenges including if the debt crisis as negotiations between his country and the european union. this runs for one hour 15 minutes.
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>> pretty think all of you. ladies and gentlemen, friends. welcome to the brookings. this is a much expected event and with a troubled accommodating everybody who wanted to listen to you. i'm really grateful that you took the time out of the cake to share your perspectives with you. you are well known, many books, 15 books i don't know all of them, but i note that to articulate the global medicine, two years ago and that modest proposal for resolving the euro crisis, two years ago. you were elected to the parliament in january 2015 picks i welcome you very deeply on the part of the brookings, the whole brookings community, that there is programs better hosting you today, all of us, the whole brookings family. i welcome mr. ambassador -- not
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yet. and also personally. and i can't help saying that also welcomed administered yanis varoufakis as a neighbor of the turks okay it is your floor and then we will have a discussion. >> thank you kemal. it's with the deepest gratitude that i wish to thank you for this honor and privilege to addressing such a fine institution at a crucial moment when our government is children and momentous task, that of completely successfully and has human -- this is humanly possible that negotiations with our partners both european and internationally. the reason why i should be focusing on these negotiations is their global significance. nutso because i'm a contagion through the financial circuit
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that frightened people so frightfully back in 2010 and again in 2012 because the outcome of our negotiations with institutions what influence i believe heavily europe's attitude toward a larger problem located in the five areas of our democracies and within the foundations of our real economies. after all, must we forget that greek that drama of 2010 was the harbinger of much that followed throughout large swaths of europe are indeed of countries further afield. its resolution one way or another in 2015 now will surely prove equally influential at the global level. one may be thinking influence i
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the dominant narrative that europe is on the mend it. it has overcome its crisis and the combination of large bailout loans and austerity especially in the periphery of economies has worked and that only greece has failed to jump on this bandwagon towards recovery. for reasons that have to do with her own very greek peculiar failures. now, that greek public and private sectors are and have been for a long time replete with malignancies which require urgent and extensive and intensive treatment or there is no doubt about this. indeed the greeks themselves were so incensed by lack of reform that they even went as far as to elect the party of the radical left to lead the country. nevertheless greases chronic
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malignancies cannot explain the depth and stubbornness of our current crisis. over what has become satellite our great depression, our seven year old and long winter of discontent. to explain this one needs to count upon our monetary units design holds and how they went the design holds other eurozone went into an unholy alliance with our nation, a great nation failings to produce a monster of a crisis in greece. one that has turned into a humanitarian emergency. and one crisis in emergency which has global significance as i was saying before. now take a look at the rest of europe. even in nations portrayed as the shining light, the beacons on the hill them what you will find
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is investment productivity growth and improvement in living standards and i can only be described as dismal even when compared to the american recovery over the last few years. europe's our houses, forget greece for a moment, serve as countries are turning the corner rely almost exclusively for doing so on building up counter services, either revelation to other eurozone member states can this is an intra-european zero-sum game, or against the rest of the global economy. at global neighbor zero-sum game. of the kind that we thought was confined to the distant past
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around the bretton woods conference. the combination of a glut of savings in europe five public and private debts come of low investment, although interest rates and generalized austerity is causing europe to address its crisis by exporting it to the rest of the globe here while undermining further the real economy of its own peripheries vote up -- both other eurozone and peripheries within the eurozone. but simply that current policy is turning europe into a capitalist force that behaves as an exporter of vital savings, an exporter of deflation but even more simply if china's external balance was a problem a few years back i believe there is good cause to think of europe as a graver concern for the global economy. none of these are well either for your poor for the global
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economy. and unlikely as it may sound at first i submit to you ladies and gentlemen, that the outcome of greece's negotiations with the imf, the european commission our partners, our fellow europeans, the outcome of this negotiation will play a major role in determining whether europe impedes the rest of the world's efforts and unitedunited states efforts to put united states efforts to book-the crash of 2008 and its stubborn repercussions. within this context let me turn to a couple of pertinent questions. i'm often asked why are you being so difficult with these negotiations? why can't you sell it quickly? rest assured ladies and gentlemen, that our government
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is keener than anyone to bring these negotiations to successful and quick conclusion and that we certainly do not believe that we have any kind of monopoly on good ideas regarding the kind of reform program which is necessary in our country and in the rest of the eurozone. the longer these negotiations go on, the greater the asphyxiation of our time and the greater the light of potential reforms so we are certainly more eager than anyone else to conclude. however, the operative word here are a successfusuccessfu l conclusion. not yet another version of extending and defending of the sort that for five years now has been turning a drawn into a crisis of global significance. a continuation of the extending and pretending that gives races that inflationary spiral yet another throw. now, let me share a thought with
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you. nothing would be easier for me personally, nothing would be easier for my prime minister, nothing would be easier than designtosign on the bottom line of the existed memorandum of understanding. of the existing program nothing would be easier than pledging to do what it says. like previous governments always pledged everything that was asked of them. internetweek to collect several billion very quickly and immediately answer the questions that the good people of the financial press are posting full of angst for us regarding our liquidity situation. accept that it would be the wrong thing to do that it would be the wrong thing to do by our creditors, wrong by our partners wrong but our people.
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when i say our people and he nudges the people of greece but equally every citizen of every member state of the eurozone. we are one people. why would it have been wrong to have our signature to the logic of the philosophy of the existing pre-existing problem? because ladies and gentlemen, this problem constitute a recipe that no reasonable person can consider to have been successful. the insistence we should continue with this logic and philosophy and its policies is bound in a medium-term to reinforce an image that we need to expand. the image of greece as a bottomless pit, an image that causes much restriction amounts our global partners while it engulfs our nation in unbearable hopelessness. now, track records, track record of this problem that we inherited from the previous government is a sorry one.
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to paraphrase john maynard keynes, the economic consequences of the peace come we are not going to sign up to targets. we know our economy cannot meet by means of policies that our partnership not wish to impose upon us, not just for our sake but for the common european and global interest. ladies and gentlemen, in 2010 a great state ceased to be able to serve its debt. while nominal gdp was falling. europe's banking system had become more or less insolvent the growth prospects of our trading partners were abysmal and the global credit crunch ensured that interest rates would be going up. and how did we deal with this problem as europeans? by means of the largest loan ever on condition of a massive internalization, a program that
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was found to shrink incomes which we all knew that's what have to be repaid. those loans were naturally extended to the greek government in the context of the -- i don't have a diagram to show to you. i had one but in the end it turned out that we don't have the facility to project it. but if you look at projections of nominal gdp growth in 2010 by the imf and in 2011 and again in 2012 and in reality you realize that dispassionately we are talking about a massive addictive failure. in any important sense and these are heady words, greece went from a time before 2008 of the ponzi growth of growth fueled by unsustainable borrowing do a kind of hysteria which is what i call strange
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posterity funded by unsustainable borrowing. i am asked also these things, why did other countries on which the same policy was tried not experiencing a catastrophic collapse? the reason ladies and gentlemen, is very simple. they suffered significantly less. we had, we are the champions of the fiscal consolidation. we had more than 11% reduction in the deficit. this is unprecedented in peacetime big and if you blocked a diagram of fiscal austerity, fiscal consolidation on one axis and what happened to nominal gdp on the other you will find that greece is falling and falling eight partner -- pattern but because of fiscal austerity is indicative but because our
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austerity with so much stranger than everybody else's the collapse of national income and all the repercussions that come with that was much greater. in this sense of greece is a classic outlier have it in the first to be bailed out in the eurozone in which let me remind you in 2010 bailouts were banned, our country into debt and expanded 11 which much occurred to the benefit of others. greece took a hit before you because of her own economic and social failures, i insist on.com we took a hit on europe's behalf because of our economic and social failures that major we were the first domino to fall and, of course, due to the eurozone's design faults. so our particular failures were exacerbated by the hits we took for the team. history will tell the story of how a series of insolvencies integrate public and private sectors were pushed under the
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carpet, portrayed as cases and liquidity. history will also register this was an abuse of the national solidarity your greece was never really bailed out as a 9% of the bailout loans and we took over the last few years we did a great state. the rest went to the banking sector. finally, the record will show the whole program and the company that owns was precisely wrong. if one is to rank all the cases of malignancy or rent seeking of oligarchic practices in greece from the worst case to the least offensive one you will find that the reform program over the last five years started from the bottom not the top. the interest of alert at the top with the ones backing the government that were pointing moralizing fingers that the majority of greeks who may have
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been micro-parasitic but nevertheless could not be easily persuaded to reform themselves when being told to do so by the greatest rent seekers who thought reforms were never for them. not surprisingly, as a result of this practice, that both private and public skyrocketed. banks ceased to function as credit provided institutions. investment dried up and all we have had over the last few years was a slowing down of the rate of shrinkage of our economy as all the fat, then the muscle come then we were proceeding to the bones of our social become the. it is often said that 2014 marks
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of recovery of sorts, a very mild, very fragile recovery but recovery. i beg to differ on this. what happened in 2014 was nominal gdp gdp in market prices continued to fall but market prices were falling fast. that is not my definition or anybody's definition of recovery. it's the definition of what happens when you go through a recession to a depression. but that's all past history. we are now negotiating a very simple principle. on the one hand, we have an existing program that the greek state is committed to legally come legally bound and surely states have continue it and therefore, there is no doubt that our government even though we were elected to challenge the velocity and the logic, the essence of those policies we
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are bound to the. this is a principle of democratic states that there is another principle. that democracy should matter for some. in some degree. the fact that we have a mandate to challenge the philosophy of the problem that we inherited it should also make a difference. so what happens when you have two different principles that clash with one another? that's what democracy are for. you have a there is principles of clashing with one another the principle of liberty, the principle of justice for inequality or the rights of individual against the interests of the collective. this is what we do in democracy. we believed together. this is precisely together we do. upon our election. we try to convince our partners into your group, in the european union, at the imf that what we
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need to establish as the common ground on which to build a new set of conditionality's, a set of conditionality's that we would all i'm sure have agreed upon had we started afresh so that we overcome the inertia the institutional inertia of the program which i am not sure ma or actually i am quite sure that almost everyone had they had the chance to start afresh would have considered to be a failure and would not want to continue along those lines. but, you know, how bureaucracies are, how complex they are and there's no -- nothing more complex than the eurozone system or lack there of managing our collective economic prospects. they tend to develop a life of their own and they tend to be
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subject to inertia and it's very difficult to shift once you have embarked upon a certain path. we would not be putting ourselves in this situation with very harsh negotiation if we didn't think that the past -- the path we have embarked upon for greece is a path that could get us to a good place. we are convinced that it can't. the greek people did not vote for us because they believed that great success story of lefty. they voted for us because they knew that it was smoke and mirrors. in this negotiation we are not trying to impose our will upon our 18 partners in europe grew. we have a mandate so today. i accept this fully. what we are asking for is for the opportunity to do two things. firstly to be heard to have our proposals for the way to which
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the greek social become must be reformed, discussed in good faith. and the second thing we are asking for is for the time and the space in which to him out these conversations to take place so that we can do the one thing that needs to be done. and what is that one thing? we need to convince our partners especially in northern europe that has come is not about going back to the prophecy of yesterday and they need to convince us they are serious about rebooting a series of measures rogue rams and fiscal consolidation plans that have failed. these negotiations must succeed and the reason why it must succeed is because as mario mario draghi very success of said two
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months ago for the your project to succeed anywhere, it must succeed anywhere. greece insists on being part of it everywhere. greece believes that a new government that the greek people have elected is offering our partners, despite a significant political differences, a chance for pluralism and democracy to prevail within a monetary union that knows how to acknowledge errors and do what the united states has done with such great success in the 19th and 20th centuries. and what does that? create consolidation out of the crisis. in europe we like to think that we have achieved that that we've learned the lesson, that we have consolidated, that we have created new institutions which are allowing our monetary union to involve -- evolve and
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develop the mechanisms that we lacked by which to counter a major earthquake shock like that of 2008. i do not believe we have done that. i believe in many ways we have proclaimed in name that which we have denied in practice. for instance, a proper banking union. this government with our quirky left wing backgrounds, i admit will come generation with our global and european partners that will simply abate district europe consolidates in a manner that creates greater efficiency, genuine growth, overcomes than major productivity failures and investment failures of the last two years, not just for greece but for everyone, and a way that
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allows all europeans especially those who are critical of the institutions of europe to remain within the european camp which is where our government firmly locates itself. thank you very much. [applause] >> while the white i just want to thank again minister varoufakis very much for his excellent speech i will say that i want to say two want to say to think they're going to i want to introduce my partner and friend here today on the panel was directed at the center of fiscal and monetary policy. he joined brookings about a year and a half ago. he was at "the wall street journal" and most recent as economic editor. is the author of two "new york times" bestsellers in 2009 and
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2012. "in fed we trust" published in 2009, and red ink 2012. he shared two pulitzer prizes in, one for the boston globe series on racism in boston. that was 1984. in 2003 for stories on corporate scandals. so i'm glad that david is here and i'm also very glad -- now will have a discussion and we all look forward to a. i would ask the first question. >> minister, thank you for your very clear remarks. to an outsider it seems as if there is very little overlap between the policies that fall within your mandates and the ones in which the imf and your
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european partners are insisting. so it's hard for us to see how this comes to the conclusion. and there's been speculation that one option here is to have some kind of referendum on staying in the eurozone or perhaps a snap election in a different coalition. is that part of your game plan now? >> this is an easy question. ask libbey not. let me bp size -- absolutely not. let me be precise. we mentioned or you alluded to a great gap between the policies that are being pursued by our government and the policies that would be acceptable to our partners. i don't think of it that way. remember what i, the key word i use, pluralism. we used to live in societies
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where we tolerated differences of opinion and different mixes of public and private virtues. so you recall in the '70s and even in the early '80s we used to take great pride of the fact we live in a mixed economy where we had a public sector playing an important role, when we had conventions and norms of the collective bargaining that created a safety net in the workplace, where we had the social welfare net that also played the same role in guarding humanitarian issues. we have public enterprise, public-private enterprises. i remember one of the great arguments in favor of capitalism back in the old cold war days was precisely this pluralism. now what we are bringing to the table there is a notion that the monoculture where everything
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public must by definition be problematic and everything private come everything that is directly related must necessarily be on the road to virtue. that monoculture has not worked very well. it hasn't worked very well here in the united states and i don't believe it has worked very well anywhere. what precise mix we use is another matter. let me be a bit more precise with regard to some of the policies and this is where i'm going to be specific. privatization of pensions, labor market. just did it three out of a hat. take privatization. let me tell you what our policy is. firstly we look at privatization's that took place in the last few years. they weren't disasters. well firstly they were disaster from the point of view of legal public rights, a number of significant ones collapsed when
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they were taken to the high court, greek high court the european competition commission. so you have private investors that go through the arduous process of winning at it and auction. they get the property rights come and make an investment and didn't whole thing goes belly up. so there's a disaster. this is neither left nor right. this is a question of efficiency and the security. we want to change that. i can give you many examples. secondly we are in the middle of it great depression. how clever is it to try to sell public assets when asset prices are through the floor? at such a time take these few please educate and put into the bottomless pit of an
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unsustainable debt. i don't think this is an apt use of public assets. we are not against privatization. we are against this kind of firesale that even coming even a little bit our debt situation. so are policies our to wrap it up are simple. we want to impose minimum investment levels on the winning bid so as to give a developmental dimension to a denationalization of privatization. secondly, we want to have a deal with the winning bidder regarding minimum labor standards, minimum environmental standards. we also want to ensure that the local economies are cut into the deal so that there is both national and local developmental
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effect. is this something we cannot discuss a sense of what the imf and our european partners? i don't think it -- we do amortization to the way the previous government did. take pensions. there's no doubt that our pension system is in trouble but how could it be otherwise? we have a collapsed labor market. we have a massive reduction in numbers of people who worked and were capable of making pension fund contributions. we have more than 30% of paid labor income declared labor. so when you look at the problem of the pension system in the labor market, that's fine. and our government is simply saying cutting and pasting from the imf bluebook the ideas of the labor market deregulation with the most regulated market in the world. we are as i keep saying, 90% of
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unemployed people receive an opponent benefits. nobody else. 91% of the unemployed have never received one year of unemployment benefits. how much more can you deregulate this labor market? workers have been working with in five months and haven't been paid a cent. why? because we're in recession and they keep reporting to work in order to not lose their dignity in order not to lose their claim to the company, do that the company survive so they don't lose everything. now, what we are saying is that in that environment smart collective bargaining agreements similar to the want of a have in germany that we want to hammer out in unison together in collaboration will help regulate markets not in an efficient way but anyway that brings the whole labor market into the labor
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market. and at the same time deal with the pension problem. one of the things that is competing a conclusion to negotiation is quite well-known, i'm not preaching by saying this come is the demand that we do not stop an automatic clause that was voted in by the previous government that would have pensions cut by almost 90%. vacuuming somebody on a 600 euro a month patient would have to lose 180 euros. in the middle of this recession. we want to put a freeze on this. we are accused of rolling back reforms. why is it reforms to reduce lolo pensions? i don't see any serious reform. we want to reform. of course, when it asked us so how do you envision the pension system in the next 20 years, i
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have to admit to you i don't have an answer that goes beyond a general description of principle, but when france germany and the united states answers that question we will answer that question, too. it may take us a little bit more than a few weeks. let me be serious now. what we are asking for is absolutely sensible principle that we are a new government. we need to come to terms with our partners on four or five large reforms that need to be instituted tomorrow which we can do because we have commonalities on a number of them. they be disagreements. we will compromise. we are perfectly prepared to compromise. introduced these reforms come up with a rational fiscal plan for the next five, eight years not the one we have now.
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once we get this agreement going in we can get negotiation about our intention is a good faith to reach a new contract with our partners by the end of june that will create a sustainable greek economy so we can cease having these conversations. >> let me make two points and ask a question. two points i think which departed already covered but i want to emphasize of them that balance sheets are more important than floors. we had the same discussion with the minister. if you focus on the floor of one year he missed a lot of the story. if a country talking about germany, can invest negative interest rates and create positive aspects,
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expendituexpenditu res may go up but, in fact, the balance sheet of the public sector improves and that's the point that larry summers makes all the time. one of the issues i think between the funding programs and the discussions not just on greece but on other countries is the importance of having truly needy and frameworks rather than annual expenditure come and i think you alluded to do. the second point that i can't help, i want to support yanis varoufakis on this come is privatization. when i was in canada job in turkey, yes, i was in your job one privatize everything come immediately. at every -- at whatever price they could fetch. that is not good for public finance, i'm sorry, and i refuse. we were asked to privatize and allow a foreign strategic investors to buy it.
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we refused and get a turkish airlines is the airline that flies to the greatest amount crunch in the world and is quite profitable and is still a state enterprise opened a small private investors. so when we talk macroeconomic policies we always discuss primary surplus. when we say structural reform, some other something under their which i think we have to get into the details of to see whether they are good or bad. and replacing a public monopoly by private monopoly, even if one is a perfectly liberal economics -- economist is not a good idea. two things i have to get off my chest. but i think there's one thing i wonder, you made a very strong point, very, very strong by saying the people of greece are the same as the other people in
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the eurozone. we are the people of the eurozone. don't you think that at the beginning it would have been better to somehow give the message, the press was quite careful at times, that there are two sides to being part of the eurozone, that they have to respect, they being your creditors have to respect greek democracy and the will of the greek people and realized that suffering the greek people have gone through but at the same time that the greek government if it wants to be in the eurozone, in the european union cannot just do whatever it wants. that message came out, we have been elected, we've got the support of the people we will do whatever we want. you can do it outside of europe but inside europe you do have to kind of stress that the europeans agreement is needed.
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>> let me start with your last point and go back to some of the earlier ones. you are quite correct. i did mention it before that having one mandate in the election of the 25th of january, we didn't win the right for free speech. i mentioned, remember there are another 18 mandates. but the point i made was it gave us, that mandate, the right to say, to put a hand up and say we would like to be heard about issues and at most important work when we are in a great depression and have a humanitarian crisis. we want, and my request at the first year ago i attended, i
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asked for four weeks during which in peace and quiet without the threat of liquidity, without that there is reports and actions that gave rise to background come to sit down to be allowed a month to have control of our ministers, to come up with a plan and he sent it to our partners. and and as for another month during which an agreement, this was our strategy. we never said that you know we are not a responsible. we have the right to do anything we want to. that was never the point. but that we have the right to be heard and we have the right to challenge the logic of the problem that we clearly face. i believe that is not to ask for them to been.
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on the other two points you mentioned regarding prioritization, we are unfairly undogmatic about privatization. we don't have an answer are you in favor? the answered to that question is which privatization? if you ask me about the railway about electricity generation and distribution, if you ask me about the horse racing outfit or an electronic gambling i will give you different answers depending on the particular case. and lastly and this is very important, you mentioned the distinction between balance sheets versus stock loans and bonds. we are a very particular economic union. we have governments without a central banks backing them. we have a central bank went out a federal government backing it.
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this is a unique state of affairs. ideally we are completely speculating and the federal government. but, of course, this is a sad realization that i am sharing with you. this crisis that began in 2008 nine, 10, instead of helping has come closer together is creating centrifugal forces that is making the political process of unifying even harder. ..

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